Weekly Musings – Index performance for week ended September 01, 2023

4 Sep 2023 , 06:37 AM

The week to September 01, 2023 saw the Nifty trading absolutely flat till Thursday. However, the sentiments changed sharply after the GDP data announcement, late on Thursday. The 88 bps gain in the Nifty for the week, can be entirely attributed to the rally on Friday. The real GDP growth (annualized) for the June quarter came in at 7.8%, with nominal GDP growth at 8%. There were concerns expressed in some quarters about low nominal GDP growth, but the fact of the matter is that inflation had been largely reined in. Also, the GDP data showed that while manufacturing may have remained under pressure, it was robust agriculture and the bounce in the services sector that made all the difference. At the other end, even the core sector growth for July came in at a robust 8.0%, which is all the more appreciable, coming on the back of 8.3% growth in June 2023.

While the GDP and core sector data brought in a sense of optimism in the markets, there were also some gnawing concerns. The prices of Brent Crude have spiked to $88/bbl and the OPEC and Russia have made it clear that more supply cuts were on the anvil. This was confirmed by no less than the Russian oil minister Alexander Novak. This is going to raise some questions for the trade account and the impact is already visible this week on the performance of the FMCG stocks. Additionally, the GDP growth in the US was lower than originally expected while the PCE (personal consumption expenditure) based inflation had spiked in the US in July. This may set the ground for a front-ended rate hike in the US. That puts the RBI in a tighter spot, but we will see more of that impact play out in the coming week. (For live impact, check market map)

NIFTY 50 INDEX – INDEX GAINS CURTAILED BY FMCG STOCKS

The table below captures the movement of the Nifty 50 index in the week to September 01, 2023.

Date	High	Low	Close
01-Sep-23	19,458.55	19,255.70	19,435.30
31-Aug-23	19,388.20	19,223.65	19,253.80
30-Aug-23	19,452.80	19,334.75	19,347.45
29-Aug-23	19,377.90	19,309.10	19,342.65
28-Aug-23	19,366.85	19,249.70	19,306.05
25-Aug-23	19,339.55	19,229.70	19,265.80
	Weekly Returns	+0.88%

Data Source: NSE

The month of August was a month of relatively tepid FPI flows. It was still positive at $1.48 billion, but nothing compared to the average monthly FPI inflow of over $5.3 billion for the previous 3 months between May and July 2023. That kept the Nifty under pressure. The VIX fell from above 12 levels to the 11.3 levels and that helped the Nifty to take support towards the end of the week. The Nifty would have closed with much higher gains for the week, had it not been for the fall in FMCG stocks and the banking stocks on Thursday. For now, the Nifty has to contend with several resistance levels like 19,600 and 19,800; before it can have a shot at crossing the 20,000 mark.

NIFTY NEXT 50 INDEX – RALLIES SHARPLY IN CONTRAST TO THE NIFTY

The table captures the movement of Nifty Next 50 index in the week to September 01, 2023.

Date	High	Low	Close
01-Sep-23	44,836.70	44,403.55	44,799.75
31-Aug-23	44,797.15	44,375.30	44,415.50
30-Aug-23	44,905.85	44,709.85	44,743.25
29-Aug-23	44,628.45	44,405.05	44,589.40
28-Aug-23	44,400.50	44,121.85	44,326.45
25-Aug-23	44,531.20	44,008.80	44,087.55
	Weekly Returns	+1.62%

Data Source: NSE

In the last few weeks, the Nifty Next 50 had shown the tendence to mirror the Nifty. For starters, the Nifty Next-50 is a collection of stocks with the potential to become Nifty stocks in the future, or Nifty aspirants. Within the Nifty Next 50, some of the digital plays and the plays focused on IT and insurance have continued to do well. Many of them are industry leaders in their own niche. The good news is that the Nifty Next 50 index is inching closer to 45,000 and would then be just about 500 points short of its all-time high level.

NIFTY MID-CAP 100 INDEX – ACTION FOCUSES ON MID-CAP STOCKS

The table captures the movement of Nifty Mid-Cap 100 in the week to September 01, 2023.

Date	High	Low	Close
01-Sep-23	39,480.50	39,035.80	39,445.60
31-Aug-23	39,241.90	38,965.90	39,118.65
30-Aug-23	39,151.90	38,953.80	39,077.55
29-Aug-23	38,844.00	38,708.85	38,794.80
28-Aug-23	38,733.25	38,508.25	38,662.15
25-Aug-23	38,805.80	38,385.15	38,471.25
	Weekly Returns	+2.53%

Data Source: NSE

It was a decisively strong week for the Mid-cap index which is now less than 40 points away from its all-time high. Stocks like BHEL in the defence space and many of the metal stocks saw a sharp rally during the week, even as mid-cap IT continued to do extremely well. At a time when the large caps are trying to find their feet, investors and fund managers saw a lot of value in the mid-cap stocks during the week. The index closed the week 2.53% higher and alpha hunting is likely to see this sector sustaining investor interest. 

NIFTY SMALL-CAP 100 INDEX – SMALL IS STILL VERY BEAUTIFUL

The table captures the movement of Nifty Small Cap 100 index in the week to September 01, 2023.

Date	High	Low	Close
01-Sep-23	12,400.05	12,268.20	12,386.45
31-Aug-23	12,264.55	12,172.05	12,243.65
30-Aug-23	12,184.00	12,104.80	12,145.40
29-Aug-23	12,040.65	12,003.70	12,021.65
28-Aug-23	11,976.65	11,892.40	11,957.10
25-Aug-23	11,954.80	11,786.45	11,869.45
	Weekly Returns	+4.36%

Data Source: NSE

The small cap 100 index is also just about 10 points away from its all-time high. The Nifty Small Cap index gained a good 4.36% during the week as stocks like India Cements, MCX and Latent View led the rally in the Small Cap index. Stocks like GMM Pfaudler, Hindustan Copper and NLC India also led the index higher. The Small Cap index has traditionally been a bottom-up micro approach to investing. Even though the flow of money from small cap funds may have slowed, the churn money is still there and most retail and HNI investors were still active during the week.

BANK NIFTY INDEX – BANK RALLY HIT BY US DATA

The table below captures the movement of BANKNIFTY in the week to September 01, 2023.

Date	High	Low	Close
01-Sep-23	44,568.55	43,830.75	44,436.10
31-Aug-23	44,399.65	43,895.05	43,989.15
30-Aug-23	44,779.65	44,149.80	44,232.60
29-Aug-23	44,673.00	44,429.80	44,495.25
28-Aug-23	44,610.40	44,201.45	44,494.65
25-Aug-23	44,359.10	43,983.75	44,231.45
	Weekly Returns	+0.46%

Data Source: NSE

Like the Nifty, even the Bank Nifty was flat as of the close of Thursday and the entire rally was triggered only on Friday. The sharp fall on Thursday was led by the higher than expected US PCE inflation and lower than expected Q2 GDP growth. This led to fears that the Fed may persist with rate hikes, raising concerns of rising yields in India too. However, the sentiments changed on Friday after the India GDP data came in at an impressive 7.8% for the first quarter. This raised the hope that the RBI may have the luxury of pausing on rates for a little longer. Like the Nifty, the Bank Nifty also saw its entire gains coming in from the Friday trade only.

NIFTY IT INDEX – STILL PREFERRED AS A DEFENSIVE BET

The table captures the movement of Nifty IT index in the week to September 01, 2023.

Date	High	Low	Close
01-Sep-23	31,550.95	31,149.25	31,514.35
31-Aug-23	31,428.00	31,067.70	31,164.90
30-Aug-23	31,197.75	31,023.75	31,103.90
29-Aug-23	30,978.25	30,784.85	30,866.05
28-Aug-23	31,025.75	30,745.00	30,773.60
25-Aug-23	30,998.95	30,803.00	30,914.55
	Weekly Returns	+1.94%

Data Source: NSE

The IT index has been a surprise package in the last few weeks, although most of the global funds had almost abandoned Indian IT stocks. In the last few weeks, the IT index was among the top gainers, but that was largely on the back of weakening rupee. However, there is also a lot of value buying happening in the large cap IT space and some very focused alpha hunting in mid-cap IT names. To add to the India IT story, the NASDAQ has also been robust and gained 337 points in the latest week, which was also a morale booster for the IT index. Going ahead, the IT index may not be so much about the Indian rupee, but more about the IT index tracking the NASDAQ and the impact of domestic IT funds value hunting in IT stocks. After all, if you take a 5 year or 10-year perspective, the IT index continues to be the star.

NIFTY OIL & GAS INDEX – FRIDAY GAS PRICE RALLY SAVES THE WEEK

The table captures the movement of Nifty Oil & Gas index in the week to September 01, 2023.

Date	High	Low	Close
01-Sep-23	7,864.50	7,738.15	7,849.35
31-Aug-23	7,830.25	7,710.90	7,729.05
30-Aug-23	7,853.90	7,806.10	7,810.30
29-Aug-23	7,859.45	7,817.80	7,836.70
28-Aug-23	7,892.95	7,813.60	7,829.50
25-Aug-23	7,906.60	7,804.60	7,838.85
	Weekly Returns	0.13%

Data Source: NSE

During the week, the oil & gas index closed with marginal gains of just 13 bps. However, the index was giving negative returns as of Thursday and it was only the bounce on Friday that pulled up the index. The bounce on Friday was largely on the back of the government of India announcing the gas price $0.85 higher for the next 6 months at $8.60 per MMBTU. This led to a sharp rally in stocks like ONGC and Reliance and these heavyweights led the index higher. However, the sharp spike in the Brent Crude prices from $84.40/bbl to above $88/bbl during the week put pressure on the downstream refining and oil marketing companies. The flat oil sector performance was largely due to the gas price spike.

NIFTY AUTO INDEX – AUGUST AUTO NUMBERS PULL INDEX HIGHER

The table captures the movement of Nifty Auto index in the week to September 01, 2023.

Date	High	Low	Close
01-Sep-23	15,964.60	15,667.40	15,928.30
31-Aug-23	15,783.15	15,643.55	15,670.25
30-Aug-23	15,732.30	15,623.70	15,678.10
29-Aug-23	15,594.65	15,472.65	15,578.90
28-Aug-23	15,521.80	15,392.35	15,475.25
25-Aug-23	15,493.35	15,293.90	15,363.60
	Weekly Returns	+3.68%

Data Source: NSE

Auto index was back to being one of the stars of the index with Maruti Suzuki and M&M leading the way. Even as M&M touched the Rs2 trillion market cap mark, Maruti announced record auto sales numbers for August, largely spurred by record domestic sales. Maruti has announced plans to double its existing capacity with an investment of Rs45,000 crore and the integration of the Suzuki Gujarat business. All these have boosted Maruti, although two-wheelers stocks like Hero Moto continues to struggle in the current scenario.

NIFTY FMCG INDEX – OIL PRICE SPIKE DENTS FMCG STOCKS

The table captures the movement of Nifty FMCG index in the week to September 01, 2023.

Date	High	Low	Close
01-Sep-23	51,326.55	51,079.90	51,240.50
31-Aug-23	51,641.10	50,913.00	51,092.65
30-Aug-23	51,560.45	51,257.85	51,513.55
29-Aug-23	51,526.10	51,182.05	51,223.05
28-Aug-23	51,650.65	51,283.40	51,390.80
25-Aug-23	51,938.90	51,415.20	51,506.80
	Weekly Returns	-0.52%

Data Source: NSE

The FMCG index was, perhaps, the only major index to close with significant losses for the week. The situation was partially mitigated on Friday, otherwise the losses could have been steeper. The major reason for the fall in FMCG stocks was spike in crude prices during the week. Not surprisingly, Asian Paints came under a lot of pressure. Across the FMCG space, crude oil is a major input and a spike means higher input cost. Also, there have been concerns of slowing sales growth, especially on the rural sales front, but that is more structural in nature. 

What we read from the markets this week?

Here are the major takeaways from the week ended September 01, 2023. 

• Nifty still struggles around the 19,500 mark. However, the sentiments would have substantially improved after the Indian economy posted very impressive GDP growth numbers for Q1 and core sector numbers for July 2023.

   

• FPI flows during the week was subdued at $343 million, hence most of the index action was coming from domestic institutions, which have now turned net buyers.